PLAYBOOK: Watch Out For This Indicator If China Tightens Lending Tonight

As you know tomorrow could be a big day from China, as regulators might announce further loan tightening.

Past tightening events jolted global markets.

Everyone will be focused on the Shanghai Composite. But as Waverly Advisors notes, you shoud also watch the short-term SHIBOR (their equivalent of the LIBOR), which is a reasonable proxy for margin debt. More loosely it’s an indicator of so-called “hot money” that finds its way into the stock market.

Last year, when this spiked, the market tanked soon thereafter. In February, when China hiked rates, there was no tank. But now we’re coming off last night’s big fall, so the jitters are real this time. If China hikes, and SHIBOR spikes, we could get a real selling stampede.

Battle stations!


Photo: Waverly Advisors

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